Just when we thought we’d seen the last of SPACs, 2025 has brought them roaring back. Remember 2021? That was the peak of the SPAC frenzy, with 600 deals raising a whopping $163 billion. Then came the hangover, a sharp collapse and regulatory crackdown under the watchful eye of former SEC chair Gary Gensler. But financial markets have short memories, and SPACs are proving no exception.
The current revival has its roots in volatility: traditional IPOs have stumbled badly under the weight of Trump’s renewed protectionist trade policies. Uncertainty scares IPO investors, pushing companies to seek alternative paths to the public markets. SPACs (special purpose acquisition companies, or blank-cheque entities) have stepped into the breach. This year alone, we’ve already seen 44 SPAC IPOs raising around $9 billion, almost matching the full-year numbers from 2024. Clearly, capital sees opportunity amid the chaos.
Interestingly, the banks leading this charge aren’t the usual suspects. Big players like Credit Suisse, Citi, Deutsche Bank, and Jefferies have mostly fled the scene, driven away by SEC scrutiny and high compliance costs. This void has become fertile ground for boutique banks like Cohen & Company, Maxim Group, and others, whose smaller scale lets them navigate regulatory complexities with less friction. These mid-tier players are hungry, flexible, and far less worried about reputational damage than their big-bank counterparts.
So what exactly makes a SPAC tick? Think of it as a two-step dance. First, sponsors—often seasoned dealmakers like Betsy Cohen, Alec Gores, and even controversial figures like Devin Nunes—form a shell company, raising money typically at $10 a share. Investors get shares plus warrants, sweetening the deal. This cash sits safely in a trust until the sponsor finds a private company to acquire and take public, known as the “de-SPAC” transaction.
Sponsors are heavily incentivized: typically receiving about 20% ownership as a “promote,” plus lucrative warrants. This creates a highly asymmetric scenario. Even a poorly performing deal can be a windfall for sponsors if the stock enjoys any temporary spike after going public. Investors, however, get one key protection: they can always redeem their shares at the original $10 price before the merger finalizes. In practice, that’s what many do, with redemption rates over 80% common in recent transactions. This forces sponsors to find additional private investors (known as PIPE deals) or accept dilution.
Yet despite these protections, investor outcomes are notoriously poor. In 2025, the median performance of newly-listed SPAC companies sits at a dismal 73% below their listing prices. It’s a pattern reminiscent of the post-boom bust of 2022. Why, then, do investors keep piling in? The short answer: speculation. The market continues betting on star sponsors and disruptive-sounding companies over solid business fundamentals.
Of course, the regulatory landscape has a lot to do with this speculative environment. The appointment of new SEC Chair Paul Atkins, seen as less stringent than his predecessor, Gary Gensler, has opened a perceived window for riskier deal-making. Small banks and ambitious sponsors have happily stepped through it, hoping to make hay while the sun shines.
But here’s the thing about SPAC cycles: they rarely end gracefully. The “dash for SPACs” is back, but it probably won’t last. Whether it’s a regulatory crackdown, market shock, or investor burnout, something always comes along to burst the SPAC bubble. Until then, expect this speculative cycle to continue—with plenty of thrills and spills along the way.